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Balfour Beatty delivers 2-3% construction margin goal

Balfour Beatty chief Leo Quinn has achieved his goal of returning the business to industry standard margins by the end of this year.

Quinn's Build to Last programme puts Balfour Beatty back on track after three years of transformation

In a trading statement this morning, he revealed construction margins had returned to 2-3% in the second half of the year, despite a competitive market backdrop.

At the support services operations profit is also expected to grow, with the margin showing further improvement within its 3-5% industry standard target range.

He also said Balfour Beatty’s performance for the year would be above previous expectations as a result of securing the partial sale of 80% of its Edinburgh University student accommodation project for £24m.

The improved performance delivers the second phase of Quinn’s Build to Last programme, which has turned around Balfour’s fortunes over three years.

Balfour Beatty has also succeeded in paying down nearly half of its gross debt in the last 12 months.

The progress in reducing debt from around £640m to nearer £350m comes amid growing concern about the tightening debt markets for contractors.

Also Balfour Beatty average monthly net cash is now forecast at £185m, ahead of the previous £140m to £170m guidance.

Quinn said: “We are on track to deliver our Build to Last Phase Two goal of achieving industry standard margins in all earnings based businesses in the second half of 2018.

“The actions we have taken since the start of 2015 have created a strong foundation for the future.

“We have consistently invested in our capabilities, systems and leadership while de-risking the business, strengthening the balance sheet and selectively building the order book.

“Going forward, we aim to drive market leading performance by using the disciplines we have instilled to translate Balfour Beatty’s expert capabilities into long term profitable growth.”

Alastair Stewart, construction analyst at Stockdale Securities, said: “This is a good performance given the debt worries affecting other companies in the sector.”